As a measure against Coronavirus Pandemic, assume that the Turkish government has ordered testing the entire population.

There are three tests for Covid-19:

TEST 1: 100% accurate test. Cost = 500 TL; test results take 24 hours.

TEST 2: False Neg Rate 2%, False Pos Rate 1%, Cost = 100 TL; test results take 5 minutes.

TEST 3: False Neg Rate 0%, False Pos Rate 10%, Cost = 100 TL; test results take 5 minutes.

The government considers three options:

1. Carry out test 1 for all population.

2. Carry out test 2 for all population.

3. Carry out test 3 for all population, then carry out test 1 on all positive cases.

The cost of treatment of a person with a positive test is 100,000 TL (Assume that the cost of treating a person with false positive is also 100,000 TL)

Questions:

1. Give estimates for all background statistics you need (e.g. cost of death, rate of C-19 in the population, death rate, etc.), give references for the values you use and discuss your assumptions in estimating these statistics.

2. Determine which option a risk neutral government should implement.

3. How would the results change for a slightly risk prone government (such as in the U.K.) and a risk avoider government (such as in S. Korea)?1 Assume some utility functions and conduct an analysis based on those functions.